Uber Changes UK Driver Contracts to Avoid New Taxi VAT Rules Outside London
In January 2026, Uber updated its driver contracts in the UK, making the company act as an agent outside London. Under the new terms, drivers contract directly with passengers, who pay the fare and any VAT directly to the VAT-registered driver. Uber will only add VAT to its own commission.
This change is designed to avoid applying the 20% VAT to the entire minicab fare outside London, as most drivers have annual bookings under £90,000 and therefore do not register for VAT. However, in London, the agency model remains prohibited by Transport for London rules; London passengers will continue to pay VAT on fares.
The update follows the November budget changes addressing VAT on minicab fares, which are expected to protect approximately £700 million in annual tax revenue. The move was anticipated since the budget announcement, with forecasts of higher prices in London and reduced work for drivers. HM Treasury stated that ending the niche VAT scheme would benefit everyday cabbies and provide additional funds for public priorities.
